Thursday, May 03, 2007

Delmarva Power to Delaware: Never Mind

Delmarva Power's president said today the company won't negotiate with a wind power company or a natural gas company unless compelled by a court of law.

The Public Service Commission, acting under the authority of 26 Del. C. § 1007(d), opened Docket 06-241 on July 25, 2006. A request for proposal (RFP) was developed, and three companies (NRG, Bluewater Wind and DPL sister company Conectiv) came forward with proposals for new power generation in Delaware. After many hours of hearings, hundreds of thousands of dollars spent on consultants and thousands of pages of proposals, analyses and comments, Delmarva want to take its football and go home?Surely such a drastic decision would not be taken lightly:

After taking a day to digest the report, Gary Stockbridge, Delmarva president, said that even if the commission votes to accept the conclusions of the report, Delmarva will refuse to negotiate. Delmarva believes accepting any of the bids would cause ratepayers to have to pay much more for years to come, he said.

Let's be clear about a couple of points: First, the State of Delaware isn't presenting Delmarva with a take-it-or-leave-it deal. The RFP process calls for Delmarva to begin negotiations based on the findings of the PSC, OMB, Controller General and DNREC. If DPL has concerns it needs addressed, they can be put on the table in the negotiating process. But Delmarva doesn't even want to talk about it.Second, Gary Stockbridge may cite the interests of ratepayers in refusing to negotiate, but he doesn't represent the public; he is accountable to DPL's parent company Pepco Holdings and its shareholders. The elected officials and agencies of state government are responsible for representing the public interest. It is sheer sophistry for Mr. Stockbridge to conflate Delmarva's interests with those of its customers, a point I discussed in a letter to the PSC sent just yesterday:

On this point, it is important to distinguish between Delmarva’s risks and those of its customers, who are now exposed to considerable risk of fuel price increases. It is understandable that Delmarva’s management would be concerned about the financial obligations imposed by a long term contract....While a long term supply contract creates a risk for the company, purchasing power every three years is not without risk. Specifically, three year purchases of power leaves Delmarva’s customers more exposed to the risk of future price increases—which is precisely the risk that the RFP is intended to ameliorate.

Mr. Stockbridge says he would rather work something out than go to court:

Stockbridge said he hopes it doesn't come to that. Even if the commission votes to order negotiations, the company will have other tools short of litigation, including working with the Legislature, Stockbridge said.

I have a hard time imagining that he'll get very far by thumbing his nose at the General Assembly, the Public Service Commission and the thousands of citizens who have taken an intense interest in Delaware's energy future.Update: The News Journal has more on Delmarva's intransigence:

The company has long argued the state's energy needs can be fulfilled through a combination of conservation, competitive buying on the open market and new transmission lines. Under the staff proposal, Delmarva could be forced to buy more electricity than it can sell, the company argued.

The agreement between DEMEC and Bluewater Wind is for the offshore wind energy generator to supply electricity, associated capacity, and related environmental attributes (also called Renewable Energy Credits) to DEMEC for 20 years. The contract is the first in the nation to provide for the purchase and delivery of energy from an offshore wind park and is valued between $200 million and $300 million over the life of the contract.

In other words, DEMEC has already taken a sizable chunk of capacity off of Delmarva's hands. They seem to think, despite Delmarva's arguments, that a long term contract for energy is a valuable asset.